This article is the third in a series examining the writings of well-known economic thinkers in light of the modern healthcare organization. The first article was on growth; the second article was about capital; and this article is on innovation.
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"It is not what you have, but what you do with what you have." — Joseph Schumpeter
A healthcare organization that fails to innovate will eventually cease to exist. The healthcare organization that will survive and thrive is the one that can take its available resources and identify new, innovative ways to deliver customer-centric services.
Joseph Schumpeter was the first economist to recognize that innovation and improved productivity are the only means to produce growth in an economy. Prior to Schumpeter's work, it was believed that little could be done to grow the whole economy, increase overall wages and improve society's living standards. Schumpeter's new perspective challenged societies and businesses to create value by focusing on and supporting innovation and productivity. He believed it is not what you have, but how you use what you have, that counts.
Innovation can be born in a laboratory, but usually what happens is the need for improved services or a new technology is discovered when a customer interacts with an existing service. This is the point at which innovation can occur within a hospital. Of course, constraints exist in any organization. Limited finances, space and time sometimes prevent hospitals from buying the newest technology, expanding their resources or implementing the perfect strategy. So instead, hospitals must invent new ways of applying and using their existing resources to meet patient needs.
1. Focus innovation toward the customer — because the customer is the reason the business exists. Legendary management consultant Peter Drucker once said, "There is only one valid definition of a business purpose: to create a customer." Under the leadership of Steve Jobs, Apple was arguably the most innovative company of the last quarter century, with a strong focus on the customer. Unfortunately, much of the innovation within healthcare organizations has been focused on improving the lot of the provider — while doing little for the customer. Internal workflow changes may create easier processes for the organization, but they may adversely affect the patient or referring physician. Focus your hospital's innovation efforts on customer-oriented functions. Ask, "What will the new product, service or process look like and how will it impact the customer?" All the fancy technologies and processes in the world will not solve the problem of an anxious patient who is waiting for a test result.
2. Create a culture of innovation. Innovation doesn't just happen. Give someone the responsibility and the authority to coordinate innovation at your organization. Who is responsible for innovation in your organization? If you say everyone is responsible, it is the same as saying no one is responsible. Pick out a restless, innovative person and put him or her in charge of driving innovation in your organization. Develop a system to engage employees in the innovation process. This could include quarterly meetings to hear the voice of the customer, incentives for employees to come up with ideas or a Lean Kaizen event to focus on improving a department process. Through these events, the Chief Innovation Officer can help identify other innovators in the health system. It is fair to say many healthcare organizations have been slow to change. Often you will hear, "It's just not done that way here," or, "I learned that procedure from Dr. Jones during my residency and it's still the best way to do it." Create a management culture where people are encouraged to challenge the status quo.
3. Find innovative ways to use what you have. In a business environment with tight budgets, there is often little capital to purchase the newest equipment or technology. That is OK. Many health systems have a tremendous investment in plants and equipment, but that alone will not carry hospitals into the future. To be successful, take what you have and find new ways to use it to help the customer. Review your capital needs and develop an alternative solution for each capital request. Rather than buying a second MRI unit, is there a way to improve productivity or expand hours? If new budgeted employees/positions are hard to come by, then evaluate your team's skills and bandwidth. Could certain technologist or front desk staff positions become dual roles — if the people in those roles had the right training and skill set?
4. Be comfortable with creative destruction and disruptive innovation. Joseph Schumpeter believed change is inherent in growth and innovation. This idea calls for the destruction of the old to make way for the new. When evaluating unprofitable departments or broken processes, don't be afraid to shut things down or start over from scratch. A hospital in Florida established a team to reduce ICU census through superior patient management. Reducing the average ICU visit by a half day could save $1,000,000 annually. The team discovered that by having a dedicated group of intensivists in the ICU (instead of having the attending physicians continue to manage critically ill patients), they could reduce average ICU length of stay from 9.3 days to 6.1 days. The result was several million dollars in savings and extra space that was converted to more useful, profitable services. It may take more than tweaking departments or patching processes to solve problems over the long haul. Clearing out the old to make way for the new can lead to the best innovation.
5. Look outside of the hospital for innovation. The marketplace changes quickly. Competitors are always developing new services, processes and programs, and if you are not doing the same, you will be left behind. There are several markets in the country, including Charleston, S.C., where new entrepreneurial urgent care centers are being built, providing primary care services, urgent care and diagnostics at convenient sites of service and at a lower cost than area hospitals. Hospitals are losing valuable patients because the customer has found the urgent care centers to be a more attractive option. Hospitals need to be proactive in addressing customer needs and identifying consumer trends. The customer will not come back to the hospital unless it can offer a better, easier service than the alternative.
The successful healthcare organizations of the future will identify customer needs and meet those needs through innovation and improved productivity. Resources will always be limited. But finding new ways to use those resources is limitless.
Barrett Clark is the director of strategy and analytics at Ivy Ventures, LLC, a consulting firm that helps hospitals grow outpatient service lines. His focus is on identifying and implementing strategic initiatives to help health systems grow profits. Prior to joining Ivy Ventures, Mr. Clark was a financial analyst at Wachovia Securities (now Wells Fargo Securities). He can be reached at bclark@ivyventures.com.
J. Stephen Lindsey, FACHE, was CEO at HCA Henrico Doctors' Hospital for 16 years. He has served as an affiliate professor in the MHA program at Virginia Commonwealth University. Mr. Lindsey is a principal of Ivy Ventures, LLC, a consulting firm that helps hospitals grow outpatient service lines. He is a fellow of the American College of Healthcare Executives. He can be reached at slindsey@ivyventures.com.
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